The National Venture Capital Association has just released the latest MoneyTree data on venture industry fund-raising, which always makes me sit up straight and take notice—it’s kind of an industry scorecard. In addition to being baffled by the fact that the amount the U.S. venture industry invests outstrips how much we raise (see below), I am intrigued by the other forces at work as the VC industry risks becoming more like a money management business. But first the facts…
In the last quarter of 2014, the venture industry raised nearly $5.6 billion for 75 funds, of which 27 were “first time” funds. While the number of funds raised was 14 percent higher than the third quarter of 2014, the amount of dollars raised dropped by 9 percent. (In comparison to the fourth quarter of 2013—a year ago—the number of funds increased by 17 percent while the dollars raised was effectively flat.)
For all of 2014, VCs raised $29.8 billion for 254 funds, which basically returns us to 2007 levels, when $30 billion was raised. Over the same period, however, VCs invested $48.3 billion in 4,356 deals. This “funding gap” of $18.5 billion in 2014 is unprecedented. In fact, if you lay out the data for the past 30 years (which I just did), the amounts raised vs. invested basically tracked each other up until 2002. A persistent and growing “funding gap” started to emerge about six years ago.
So either these lines converge rapidly—that is, VCs simply shut off the investment spigot (which is easier than raising materially larger funds), or there will be a more profound evolution of the early stage capital marketplace.
In an environment of basically free money and zero interest rates, limited partners are increasingly looking to … Next Page »Comments | Reprints | Share:
UNDERWRITERS AND PARTNERS
San Diego-based Aspyrian Therapeutics, founded in 2010 to advance technology that uses near-infrared light to activate an immune response targeting certain types of tumors, has raised almost $8.5 million from investors, according to a recent SEC filing. The investors were not identified.
The technology was developed at the National Cancer Institute (NCI) by Hisataka Kobayashi and Peter Choyke, the scientific leaders of the NCI’s molecular imaging program. Their approach uses near-infrared light to activate a toxic dye attached to monoclonal antibodies that bind to the surface of certain tumor cells. The concept is promising because the treatment is highly specific to cancer cells with epidermal growth factor receptors, and because the near-infrared light has caused no detectible phototoxic effect among antibody-dye conjugates that are not bound to the surface of cancer cells.
Aspyrian secured an exclusive license for the technology. According to the company’s website, Aspyrian plans to obtain early stage clinical data by the end of this year that demonstrates the safety of its technology as well as an anti-cancer response in humans.Comments | Reprints | Share:
Bitcoin took a potentially big step toward legitimacy in the U.S. today with the launch of the nation’s first licensed exchange for the virtual currency. Now, it’s up to San Francisco startup Coinbase to convince would-be traders that its platform is a safe and preferable place to put their money.
Founded in 2012, Coinbase has so far received the green light from regulators to serve residents in nearly half of U.S. states, including New York, California, Massachusetts, Washington, and Wisconsin.
Coinbase’s investors have pumped $106 million into the company, including a $75 million round that closed this month, the Wall Street Journal reported. Its backers include the New York Stock Exchange, USAA Bank, the venture arm of Spain’s Banco Bilbao Vizcaya Argentaria SA, Andreessen Horowitz, and Union Square Ventures.
Coinbase’s early approvals by state regulators and the backing of major financial institutions and venture capital funds could go a long way toward bringing the company’s exchange—and the controversial bitcoin currency itself—into the American mainstream.
The fledgling digital currency and its early adopters have certainly taken their lumps. Bitcoin has been dogged on overseas exchanges by unpredictable swings in price, recently dropping to around $240 from its zenith of more than $1,200 in late 2013. Last year, around half a billion dollars’ worth of bitcoins went missing from Japan-based exchange Mt. Gox, which then filed for bankruptcy. That’s not the only bitcoin exchange to come under attack by hackers; a few weeks ago, there was a security breach at Bitstamp, a Slovenia-based bitcoin exchange.
Coinbase says it has insurance against theft or loss of bitcoins, which could help alleviate concerns about the safety of users’ funds. The company currently counts about 2 million individuals and 38,000 businesses that use its services.
The launch of Coinbase’s exchange comes on the heels of bitcoin advocates Cameron and Tyler Winklevoss, the twin brothers known for their legal battles with Facebook CEO Mark Zuckerberg, announcing plans for their own bitcoin exchange, Gemini.Comments | Reprints | Share:
In 2015, look for the innovation community to be talking about Big Data Variety: the problem, how to fix it, how to make money off of it.
Companies have invested roughly $3-4 trillion on enterprise software over the last 20 years, with Gartner forecasting $320 billion in 2014 alone. A lot of that investment has gone into single systems and applications—from Oracle and SAP to proprietary enterprise resource planning and product lifecycle management systems to (more recently) Hadoop and Hive. The good news: organizations are sitting on vast reserves of diverse, potentially invaluable corporate data. The bad news: they can’t get at a lot of the value because it’s locked in data silos tied to these systems, applications, organizations, individuals, or all of the above.
Welcome to the world of Big Data Variety. Organizations now want to use this data broadly—along with all external data sources—for analytic applications. But most organizations don’t even know what they have—data sources, entities, and attributes—let alone how to get them to work together at scale to power new insights and discover long-tail business opportunities.
Meanwhile, companies are also investing heavily in big data, which Gartner estimates at $44 billion in 2014. Yet today 85 percent of that big data investment is going toward IT services, not software. In an HBR post, Mahesh S. Kumar wrote that “the disproportionate spending on services is a sign of immaturity in how we manage data,” citing Marc Andreessen’s seminal argument that for each new technology wave, the money eventually shifts to software.
Opportunity is knocking: Clearly, we need innovation in software that radically improves the connection, enrichment, and management of the full volume and variety of an enterprise’s data sources. Most of the high-profile software innovation so far (for example, Hortonworks/Hadoop) has targeted storing and aggregating data. The nastier problem—and the bigger opportunity—by far is connecting data silos semantically at scale, shortening the time to analytics, and discovering the data in an enterprise that can dramatically improve signals in predictive models.
This isn’t a problem that will be solved overnight, and it’s going to get worse for businesses (almost every investment in a new, single-vendor system creates a new data silo). And the cultural changes may be the biggest challenge: realizing that the solution is NOT to throw more IT people or consultants at them. Or even to throw data scientists—the new unicorns/rock stars—at them.
When you think of it, our future depends on the ability to harness Big Data Variety. We need to be able to quickly ask—and answer—big questions. Questions ranging from “How can I get the best price (or the most uninterruptible supply source) on an essential part from my global supply chain?” to “Which of my 8,000 research chemists is furthest along working on a molecule that could accelerate a cure for _____?”
A year from now, I think we will look back at some excellent progress here.
[Editor's note: To tap the wisdom of our distinguished group of Xconomists, we asked a few of them to answer this question heading into 2015: "What will everyone in the innovation community be talking about a year from now?" You can see other questions and answers here.]Comments (3) | Reprints | Share:
Two weeks ago, in a sixth-floor room in San Francisco’s Four Seasons Hotel overlooking Market Street, Tony Coles, Susan Lindquist, and Kenneth Rhodes met with one financier after another in a campaign to raise money for their new Cambridge, MA-based startup, Yumanity Therapeutics.
Their pitch centered around yeast. “[Yeast] is where statins were first identified,” Coles said, pointing to a slide Yumanity was showing to investors.
He’s referring to the landmark cholesterol-lowering drugs, like atorvastatin (Lipitor), which changed cardiovascular care and became some of the best-selling drugs of all time. They were discovered decades ago by a Japanese researcher who saw that statins were being secreted by fungi to kill other fungi.
Yeast is a simple organism, but Yumanity is putting it at the heart of an extremely complex undertaking, even by biotech standards.
The new company is using yeast to build a process Coles (pictured above) boldly contends has the potential to “transform” the way drugs are discovered. It’s souping up an old screening method with genetic tools and stem cell technology, with an exceedingly tough goal in mind: finding treatments for neurodegenerative disorders like Parkinson’s, Alzheimer’s, and amyotrophic lateral sclerosis (ALS).
These diseases aren’t well understood biologically. They’ve bedeviled scientists and pharmaceutical companies alike for decades. Billions of dollars have been spent discovering and testing therapies for them, and most have come up empty. Yumanity thinks it’s found a method that might help crack the code, to find new angles to attack these devastating diseases and increase its odds of success.
“This is as good as it gets at the earliest stage,” Coles said of the company’s approach.
What’s more, Yumanity’s leading trio is bucking the traditional venture-backed biotech model. Building the team is first, funding the company is second; Coles and Lindquist used their own money to seed Yumanity, brought in Rhodes, and launched the company in December without a venture investor or a big round of cash. They were at the J.P. Morgan Healthcare Conference earlier this month looking for that round, which Coles wants to close by the end of March.
Coles also wants enough funding to get the company through “several key milestones.” He won’t say how much Yumanity is looking for, or what those milestones are. But he was clear that he wants Yumanity to be set for a long period of time.
“We don’t want to raise money every 12 to 15 months,” he said.
It’s an atypical way to start a life sciences company. But Yumanity has unusual star power behind it. Coles is a wildly successful biotech executive who most recently steered Onyx Pharmaceuticals to a $10 billion buyout in 2013. Lindquist is a National Medal of Science winner and a member and former director of the Whitehead Institute. And Rhodes is a former Biogen Idec (NASDAQ: BIIB) neurology executive.
They’re making a complicated and tantalizing pitch to investors that entails enormous upside and risk, and a potentially long wait for any data in human beings—the real proof point for any drug developer. Coles isn’t disclosing how long he thinks it’ll be, for instance, until Yumanity gets to its first clinical trial.
But it’s an investment that’s more likely to happen these days, when dollars are pouring into early-stage biotechs. Moderna Therapeutics, for instance, just raised $450 million and is still anywhere from one to two years away from its first clinical trials. Juno Therapeutics (NASDAQ: JUNO) raised more than $300 million and went public in less than a year. Coles points to both companies, specifically, as non-traditional investment examples that came to mind when he first discussed how to build Yumanity with Lindquist in May.
“They just did it a different way,” he said of Moderna and Juno. “And given the size of this opportunity and the enormity of the challenge in neurodegenerative diseases, this seemed like the one that, as we were chatting, deserved a special approach.”
We’ll soon see what that approach is. A mega-financing round? A small one accompanied by a large deal with a pharmaceutical company for non-dilutive cash? Coles will only say the company is exploring all options, and that it’s too early to turn any of them down. Several outside observers I spoke with were confident that even with the questions surrounding Yumanity, Coles’s track record alone—between restructuring NPS Pharmaceuticals (just sold to Shire for $5.2 billion) and turning around Onyx—would be enough to bring investors to the table.
“Tony has been so successful that he’s likely to attract the right kind of funding for the first few years,” said Elliott Sigal, the former R&D chief at Bristol-Myers Squibb, where Coles worked many years ago. (Sigal has no ties to Yumanity.) “But the important questions for him are what is the time to clinic? And what’s the human validation that they’re going to end up with [from] these targets?”
Lindquist said she chose to build a biotech in this atypical way because of her past experience with FoldRx Pharmaceuticals, the first company to come out of her work. Lindquist is a pioneer in the field of protein misfolding—a common biological mistake that occurs when long linear chains of amino acids morph into three-dimensional proteins. To function properly, proteins have to fold precisely.
When they misfold, they can cause “cascades of destruction” and “wreak havoc” on a cell, as Lindquist put it. They can accumulate into clumps or plaques, for instance, like amyloid beta in the brains of people with Alzheimer’s, or so-called Lewy bodies in Parkinson’s patients.
Lindquist has won a number of honors for her work on this complex origami, how it might come into play in a variety of diseases, and what it might take to “straighten out” these misfolded proteins. Among the honors are the Sigma XI William Procter Prize for Scientific Achievement in 2006 and the National Medal of Science in 2010.
In 2004 she co-founded FoldRx with The Scripps Research Institute’s Jeff Kelly. That company, Lindquist said, consisted of two things: “near-term chemistry” from Kelly that led to the drug tafamidis (Vyndaqel) for a protein folding disease called familial amyloid polyneuropathy (FAP); and a “very early-stage [drug] discovery platform” Lindquist was developing, which she described as a “primitive, earlier incarnation” of the process Yumanity is using today.
The company raised $90 million from Alta Partners, Fidelity Biosciences, and others, but the Great Recession derailed … Next Page »Comments | Reprints | Share:
How many articles have been written about the innate business acumen of Steve Jobs, the brilliant coding abilities of Mark Zuckerberg, the extraordinary gifts of Yo Yo Ma?
And what if they were all wrong?
Geoff Colvin has combed through the research, and he argues that, again and again, scholars have almost completely discounted the notion of talent.
Colvin, the author of Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else, believes that talent can’t—and won’t—help you get ahead. I talked to him about why the myth survives—and what you can do to attain excellence.
[This interview has been edited and condensed. For the full interview, go to innovationhub.org]
Kara Miller: Who is a person that demonstrates this idea that talent is overrated?
Geoff Colvin: There are many, many examples. One I like to mention because it’s surprising to many people is Tiger Woods. Most people think: if ever anyone was born to be a great golfer, it has to be him because he’s so utterly dominant. But when you look at the evidence, it really is just the opposite. The reason he is a great golfer is that he had been better prepared than anyone in the history of the game. His father, Earl Woods, put a club in his hands at nine months and taught him golf swings at two years old. Great performance doesn’t come from a natural gift; it comes rather from what the researchers call deliberate practice.
KM: So what’s the difference between deliberate practice and regular practice?
GC: First, the foundational study in this whole field was a study of very good violinists at an academy in Berlin. What the study found was that it was indeed total lifetime hours of accumulated deliberate practice that accounted for the difference in ability between these violinists. Deliberate practice is an activity that is designed specifically for a particular person at a particular moment in their development. This is why teachers, coaches, and mentors are so important. You don’t do the same practice over and over; as you get better, your practice has to change. Second, deliberate practice is constantly pushing you just beyond your current abilities. Third, you get constant feedback. You can’t get better without knowing how well you’re doing.
KM: Does this mean that if you’ve put in 30 or 40 years with a company, you’re probably better than someone who’s much newer at the company?
GC: Well, you may have an advantage in social ways, but there’s actually a lot of research on people who have done work over and over in all kinds of fields. What seems to happen is people go on automatic pilot. They get to be good enough, and then they stop thinking about it. The few people who do become really good are constantly pushing themselves, or finding ways to be pushed just beyond their current abilities. Even in business, the great performers are ones who are trying to stretch themselves.
Danielle Herrera contributed to this write-up.Comments (1) | Reprints | Share:
The news flow has been slow since the end of this year’s J.P. Morgan madness. The week in life sciences was dominated by President Obama’s call for a national precision medicine initiative. (For a West Coast angle, Xconomy asked genetics pioneer and Seattle fixture Lee Hood to weigh in with his thoughts.)
Let’s start our short roundup in the West Coast’s northernmost biotech hub and work our way south.
—Zymeworks of Vancouver, BC, said Wednesday it will collaborate with Celgene (NASDAQ: CELG) on bispecific antibody programs. In addition to an equity investment, Celgene is paying undisclosed upfront fees, and Zymeworks could earn as much as $164 million from the Summit, NJ-based drugmaker for each candidate that reaches the market.
—Staying north of the border: Fresh off its merger agreement with OnCore Biopharma, Tekmira Pharmaceuticals (NASDAQ: TKMR), also of Vancouver, said Wednesday it has begun a Phase 1 trial for its hepatitis B treatment.
—Sue Biggins, a researcher at Seattle’s Fred Hutchinson Cancer Research Center, has won the Genetics Society of America’s Edward Novitski Prize for her work on the kinetichore, the molecular machinery that regulates chromosome segregation during cell division.
—According to the San Francisco Business Times, Nektar Therapeutics (NASDAQ: NKTR) is expanding its San Francisco footprint in anticipation of good news from its larger partners AstraZeneca (NYSE: AZN) and Bayer HealthCare, as well as late-stage breast-cancer trial data.
—Forbes broke the news late last week that former employees of NantHealth, part of Los Angeles billionaire Patrick Soon-Shiong’s life sciences conglomerate NantWorks, are alleging fraud in a lawsuit. The company denied the allegations.
—Neurocrine Biosciences (NASDAQ: NBIX) of San Diego said Friday the FDA has granted orphan status to its treatment for congenital adrenal hyperplasia, a genetic disorder that affects the adrenal glands.Comments | Reprints | Share:
SprinkleBit CEO Alexander Wallin says he got hooked on investing in stocks when he was 14, working at a small ice cream kiosk in Skärhamn, on the West Coast of Sweden. He invested everything he earned that summer in Metro International, a media company then trading at 3.80 Swedish Krona a share. Metro later issued additional shares at 2.80 SEK—26 percent below his purchase price. But Wallin saw the plunge as a buying opportunity, and doubled down on his investment.
He says he sold his stake in Metro two years later, at an average return of 287 percent. After that, the teenager began creating spreadsheets of data and became an ardent stock picker. By the time he began studying economics in 2007 at UC San Diego, Wallin says, he had saved enough to pay for college himself.
Wallin says his big epiphany came in 2010, when he read James Surowiecki’s The Wisdom of Crowds during a semester at Harvard University. When he returned to UC San Diego, Wallin developed the “voting power model”—an algorithm that uses recent transactions to assess what he calls investors’ “magnitude of conviction.” He founded SprinkleBit out of that research in 2010, and graduated in 2011.
The website initially offered a social stock trading simulator, adding such additional services as online education as it evolved into a comprehensive trading platform. After years of what Wallin calls Kafkaesque challenges, San Diego-based SprinkleBit began operating its online trading platform in November. I talked with Wallin, now 27 years old, by email and phone, and edited his story below.
Xconomy: What is SprinkleBit?
Alexander Wallin: The initial plan was simple—create a social investing platform where people could connect all over the world to discuss ideas and form groups known as pools to execute their trades together with both virtual and real money. We wanted to create a community where investment ideas and solutions are exchanged in an environment of transparency, accessibility, and trust.
X: Virtual money? Are these simulated trades?
AW: SprinkleBucks is our virtual currency, which users will eventually be able to turn into goods and services. For now, it’s mostly used for bragging rights. The reason we are focusing on a stock simulator is because practice makes perfect, like any other aspect in life.
X: How does it work?
AW: We have a four-step process to learn how to invest.
1) Users educate themselves through SprinkleBit University.
2) Watch other investors in the SprinkleBit community and see what they do.
3) Practice risk-free with our stock market simulator.
4) Execute real trades with our integrated brokerage platform.
As members implement their investment strategies, a proprietary algorithm generates a Voting Power Index. This VPI confirms how skilled they are with making investment decisions. This enhances the trust factor between members within the SprinkleBit community, and we can clearly see how the beginners have benefited from following the pros.
X: How does SprinkleBit make money?
AW: It’s completely free to join SprinkleBit and to … Next Page »Comments | Reprints | Share:
In late 2012, President Obama awarded Leroy “Lee” Hood the National Medal of Science for a lifetime of achievements, including the invention of machines that made the historic Human Genome Project possible.
So when Obama announced yesterday a “precision medicine initiative”—something that would surely require ever-deeper knowledge about the personal genetic differences that influence health and disease—I asked Hood for his thoughts.
He didn’t mince words. “It’s so vague and fuzzy, I don’t know what it means,” Hood said this morning from Southern California.
More details should follow, but not at this early date. (The National Institutes of Health referred all questions to the White House, which didn’t return inquiries.)
Hood would like to see an actual entity emerge, something akin to the original publicly funded Human Genome Project, which was run by Francis Collins, now the NIH’s director. “The Human Genome Project provided crystal-clear focus on which technologies to develop,” said Hood. “With this, there are a lot of decisions to make whether it’s to be focused and coherent, or if it provides a little something for everybody.”
That’s a good point. Precision medicine means many things to many people (Hood prefers the term “personalized”). An initiative under that rubric could extend widely to all corners of modern medical research. “Precision medicine is just saying ‘we’ll take measurements’—and you can measure everything,” said Hood, who is president of the Institute for Systems Biology in Seattle.
As I noted earlier today, the NIH has put precision medicine front and center for some time now and provided this definition in its latest budget proposal: “Precision medicine refers to the tailoring of treatments to the individual characteristics of each patient… NIH undertakes the challenges of precision medicine through myriad strategies.”
If a focused initiative emerges, Hood would like to see better computational tools to determine when disease begins. He’d also like to see the smart phone, or some offspring of it, become the main diagnostic tool. Tissue-on-a-chip technology, which the NIH highlighted in its most recent budget as part of its focus on precision medicine, is also “extremely promising,” he said.
Much of Hood’s wish list dovetails with his current mission of kickstarting a decades-long “longitudinal” comprehensive survey of the state of health of up to 100,000 people. (I interviewed his co-lead investigator, Nathan Price, about the project last summer; they’re just now analyzing data from the first 100 volunteers.)
For ideas about which nitty-gritty bioinformatics tools could use more funding to push faster toward better treatments for complex diseases like diabetes and cancer, I asked David Mittelman. He’s a geneticist, entrepreneur, and chief scientific officer of Tute Genomics in Provo, UT. He mentioned three areas:
—Improvements in the identification of complex mutations such as copy-number variations and splice variants.
—More experimental data on the consequences of genetic changes. Mittelman referred to a project funded by the NIH and highlighted on Collins’s blog last year. The lead researcher is Jay Shendure of the University of Washington in Seattle.
—Better standards, performance testing, and calibration of the variety of sequencing methods and processes available. “Stuff like [this] generally requires government funding,” said Mittelman, whose previous startup, Arpeggi, built a free community-based test site for next-generation sequencing. “We can’t have personalized medicine if every instrument or clinical group gets a different answer.”
If Obama’s initiative turns out to be not a Human Genome Project 2.0, or something with similar focus, but a repackaged call for more NIH funding—”a little something for everybody,” as Hood says—that would be welcome, too, by Hood and countless other researchers.
Except for the brief spike from the post-crash stimulus package, NIH funding has been flat for years, which factoring for inflation, actually means NIH funding has decreased for more than a decade.
The presidential push could also benefit a bipartisan Congressional initiative called 21st Century Cures, cosponsored by Reps. Fred Upton (R-MI) and Diana DeGette (D-CO). Upton is chair of the House Energy and Commerce committee and wants to introduce legislation early this year. Upton and DeGette have convened hearings, discussions, and roundtables in Washington and around the country, but there’s still little indication what the legislation will entail.Comments | Reprints | Share:
Biotechs keep cashing in. The latest is Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY), which is entering the most critical juncture in its 13-year history as it tries to enter the rarified realm of biotechs with their own products on the market. The RNA interference firm said Monday it would tap the public markets for a $450 million financing round of its own, even saying it could use the money for “potential acquisitions.”
But when Xconomy spoke with Alnylam CEO John Maraganore (pictured above) at the J.P. Morgan Healthcare Conference in San Francisco last week, where optimism about the capital markets abounded, he was adamant that Alnylam would tread a different path of expansion.
“We’re not looking to buy anything, because everything we have inside is what we want to invest in,” Maraganore said. He added that the company’s cash “is going to be needed to become profitable and to execute on this plan.”
We spoke before the new $450 million fundraising plans were announced, but Alnylam was already sitting on $880 million in cash as of the end of 2014. The five-year plan, as he outlined it, is to make Alnylam a commercial enterprise, selling its own drugs—with three on the market by 2020.
The plan also includes nearly tripling in size. Alnylam currently has about 250 workers; Maraganore expects that number to approach 700 in 2017. The company is building up a European operation, adding development roles, and down the road, will start hiring a sales force too.
The pledge to look inward for resources, not outward for acquisitions, is all the more notable because Alnylam, which has stuck to rare diseases with few, if any approved treatments, wants to expand into disease areas in which many biopharmas consider too expensive to work.
Alnylam and others in the field have made progress overcoming the big obstacle in RNAi—how to safely and effectively deliver these large molecules into the body, where they’re supposed to silence certain genes before those genes make specific proteins that trigger a disease. But Alnylam still has plenty to prove in clinical trials. Its first RNAi drug, patisiran, won’t produce final Phase 3 data for another few years in the rare disease transthyretin-mediated amyloidosis. A version injected subcutaneously (rather than intravenously, like patisiran) called revusiran is in mid-stage studies. Several other pipeline candidates are either in Phase 1 or preclinical testing.
When we spoke at J.P. Morgan, Maraganore mentioned potential programs in diabetes, nonalcoholic steatohepatitis (NASH), hypertension, and hepatitis—risky, costly, competitive, and lucrative markets. He’s now dividing the company into three areas: rare diseases, cardiometabolic disorders, and infectious diseases. This isn’t because he’s looking to break up Alnylam, he says, but because of recent revelations about its capabilities. For example, in some cases, the company’s subcutaneous RNAi drugs are lasting several weeks or months—which, he argues, could beat a once-a-day pill for high cholesterol, for instance, solely based on convenience.
There’s another factor at play: dealmaking. All Alnylam’s current and future rare disease drug candidates are partnered with Sanofi’s Genzyme unit, thanks to the $700 million deal the two companies signed last year. In essence, it’s a similar deal to the one Sanofi inked with Regeneron Pharmaceuticals (NASDAQ: REGN) many years ago; large company takes big stake in smaller company, and they work together to develop a variety of drugs and share the costs and profits.
Just one of Alnylam’s drugs in cardiometabolic and infectious disease, however, is partnered—and that deal, with the Medicines Co. (NASDAQ: MDCO) for a single RNAi drug for high cholesterol, appears to be an anomaly. Maraganore says if Alnylam does end up partnering, it would only be through deals that resemble the broad Genzyme partnership, not the one-off Medicines Co. deal from a few years ago. Those Genzyme-like transactions are the deals it has in mind for its cardiometabolic and infectious disease portfolios.
“We’re not going to do onesie-twosie type deals, it just doesn’t move the needle for us,” Maraganore says. “We never say never, but it would have to be unusually fantastic in some other manner to do it differently.”
There are many ways to build a company with a platform technology based on high-risk, high-reward science. Take Moderna Therapeutics, for instance. It’s hiving off groups of its messenger RNA therapeutics and housing them into subsidiaries; the company itself is the product engine, while the so-called “venture” units, which it wholly owns, are the vessels for development and ultimately commercialization.
This spreads out risk and the big bills for clinical trials those ventures will rack up. The more than $800 million Moderna has raised also relieves the pressure to go public soon—at least that’s what its executives have told Xconomy. And CEO Stephane Bancel has been adamant that Moderna would bide its time and get to clinical trials when its technology is ready, rather than rush; the company has said recently it expects its first trials to start in the next 12 to 24 months.
Alnylam went a different route. It IPO’d two years after forming. It tried a spinout once, joining with Isis Pharmaceutcials (NASDAQ: ISIS) to create Regulus Therapeutics (NASDAQ: RGLS) in 2007. But it only owns 12 percent of that company today, and Maraganore says he doesn’t envision doing those types of deals anymore.
“It takes a lot of time to do it, and frankly it takes a lot of senior management time,” he says. “And then on top of it, we don’t get rewarded for it by shareholders.”
By contrast, Alnylam was rewarded for last year’s Genzyme deal: shares soared more than 20 percent after it was announced, and they now trade near $100 apiece. Perhaps it’s no surprise Maraganore is eyeing other deals like it.
Here are some other edited excerpts from my conversation with Maraganore about the strategic levers he’s trying to pull (or avoid), and the specter of Moderna, as Alnylam tries to get its first drug to the finish line.
Xconomy: You’ve said before that Alnylam was focused on rare diseases. Now it’s forming divisions for cardiometabolic diseases and infectious diseases—why?
John Maraganore: We want to have … Next Page »Comments | Reprints | Share:
Dogs need groceries, too.
Instacart, the grocery-delivery startup that recently raised $220 million from investors, is taking its quick-turnaround online delivery service beyond the supermarket for the first time in a partnership with national pet-goods retailer Petco.
The partnership is hitting the Boston and San Francisco markets first, and could be expanded if Petco likes the results it gets from letting customers order their pet food, cat litter, chew toys, and other supplies online.
The deal is a pretty natural expansion for Instacart. The San Francisco-based company’s bread-and-butter service is online grocery delivery, in as little as one hour, fulfilled by a team of free-agent couriers who field their orders over a smartphone.
Grocery delivery services aren’t new, but working as an outside party lets Instacart shoppers do something they can’t with in-house grocery delivery: skip around between multiple stores. That’s somewhat helpful when you’re talking about several bags of regular groceries, but adding different types of stores to the mix could make the variety even more attractive.
Expanding into pet-store delivery also foreshadows more possible expansions by Instacart—the company’s founder and CEO, former Amazon engineer Apoorva Mehta, has previously said the company might add new retail categories.
One reason Instacart has focused on grocery stores, Mehta has said, is the frequency of orders. San Diego-based Petco fits that bill too, since furry (or feathered or scaly) friends need to eat, and also go through bedding, cleanup supplies, and other gear relatively quickly.
Depending on the size of your pet and how much they eat, the stuff can also get pretty bulky, as anyone who has hoisted a 40-pound bag of dog food can tell you.
“We view this as groceries for other cherished loved ones in the family,” said Nilam Ganenthiran, Instacart’s head of business development and strategy.
For Petco, the Instacart experiment is a way to see if the company can grow its sales and better serve its existing customers in a way that might be less expensive than offering its own deliveries.
Petco has offered delivery in the past by contracting with local delivery companies, but the service hasn’t expanded beyond Chicago and New York, Petco operations vice president Bryan Dean said.
Instacart was an attractive partner because of the high value it places on customer service, Dean said—a pretty crucial consideration when you’re formally tying up with an outside company to represent your brand to consumers.
The speed of Instacart’s service also helps. The startup charges consumers different delivery fees based on how soon they want their items delivered, with one hour being the fastest. That means higher-end pet food that’s kept cold can now be ordered online and dropped off in time to get into Fido’s bowl while still fresh.
“The kicker for us, which I think would be great for the customers, is the fact that they can get fresh or frozen items from Petco delivered to them,” Dean said. “That’s big for our customers.”
It probably doesn’t hurt that Instacart users are already using the service to do their shopping at grocery stores that sell pet food and a more limited assortment of animal supplies. If there are already Petco shoppers among the Instacart user base—and they’ve been asking for a partnership, Ganenthiran said—it makes sense to try for a foothold in the growing market.
“First and foremost, our consumers are pet owners. We know that in talking to them and seeing what they buy,” Ganenthiran said.
Dean and Ganenthiran wouldn’t discuss the financial side of their pilot project, but the deal fits squarely with Instacart’s central business plan of charging retailers for partnerships that can bring them increased sales.
One prominent Instacart partner, the premium grocery chain Whole Foods, is heavily advertising Instacart deliveries and has even installed dedicated checkout kiosks and staging areas in stores to help Instacart’s delivery speed the orders to customers.
The Petco deal is an interesting test for Instacart, especially with Petco openly labeling this a test run. If the two don’t expand or continue their partnership, it’ll be a telling window into the growing pains of a fast-moving private company. If it works, and other retailers start signing up, there’s a good chance that Instacart’s take on digital delivery couriers has the legs its deep-pocketed investors are betting on.
[Corrects spelling of name to Ganenthiran throughout.]Comments | Reprints | Share:
In the summer of 2013, the medical device startup Scanadu made headlines around the world when Scout, its handheld medical diagnostic tool for consumers, raked in an astounding $1.6 million on the popular crowdfunding platform Indiegogo.
That’s all well and good for a medical device, but most biotech veterans remain skeptical that crowdfunding can make a meaningful financial contribution to new biopharmaceutical development. I’ve worked in biopharma for 17 years, and I believe it can.
What’s more, I believe crowdfunding based on donations, as well as on equity, can work. I believe it so strongly that in March 2014, I founded Impatient, a donation-based nonprofit crowdfunding platform for philanthropists who are comfortable with deriving social good from for-profit enterprise. Impatient will exclusively fund Phase 2 trials at biotech companies.
We have chosen donations as our crowdfunding mechanism, and our donors’ “return” is both new medicines for patients and royalties that Impatient will receive on the sales of these medicines. Royalties are the only “cost” to the participating biotech company, and will be donated to other non-profit organizations to pay for access to medicines for people who cannot afford them: a virtuous circle of giving and giving back. (Impatient applied for 501(c)(3) non-profit status from the IRS in July 2014 and, if successful, donations to Impatient will be tax-deductible.)
Yes, biopharma clinical trials require large sums of money, as Xconomy outlined last year. For example, a Phase 2 trial of a promising medicine typically requires more than 10 times the financial investment that Scanadu received from the public for its Scout device. But, in my opinion, the greatest barrier to biotech crowdfunding projects is not money. A much greater challenge is the drug industry’s struggle to connect with patients and their supporters.
There are four distinct mechanisms of crowdfunding: debt, rewards, equity, and donations. Let’s look at the first three mechanisms for a moment in the context of biopharmaceutical development.
Debt seems an unlikely option for biotech given the long wait for a potential revenue stream and the high rate of failure.
Rewards, as pioneered by Kickstarter, are popular outside of biotech. Scanadu also went that route, with the reward being early access to Scout, a device that doesn’t require a prescription. Prescription drugs don’t lend themselves to sneak peeks or beta versions for valued donors. However, with cost-sharing on the rise and patients shouldering more co-pays and co-insurance, I can imagine a not-too-distant future where donors to a biopharma development campaign are rewarded with price discounts for the drug in question if and when it comes to market.
The third crowdfunding mechanism is equity, as described in the 2012 JOBS Act, and I expect it to have a significant impact on biotech within the next 30 months. We’re still waiting for the Securities and Exchange Commission to write the regulations, but many states are leapfrogging the SEC by writing their own equity crowdfunding rulebooks. As Xconomy’s Michael Davidson reported in November, in-state businesses can now sell equity to in-state investors in more than a dozen states.
This is great news for neighborhood businesses. But it won’t do much for biotech. For the time being, the biotech ‘crowd’ remains an exclusive one: accredited investors only (the wealthy, sophisticated ones, not the people we think of as “mom and pop” or retail investors).
The thresholds for membership in the accredited investor crowd in the U.S. have not changed significantly for 32 years and the SEC is conducting a comprehensive review. Whether the review increases or decreases the potential of this funding mechanism for biotech companies is unclear.
Even so, the change in the JOBS Act to allow pre-IPO companies to raise up to $50 million from accredited investors (up from a paltry $5 million pre-JOBS) now makes equity-based crowdfunding a potentially strong investment vehicle for early-stage biotechnology companies. Start-ups like New York-based Poliwogg want to facilitate these transactions.
And while the U.S. rules remain up in the air, other countries are moving ahead with equity crowdfunding. ReWalk Robotics (NASDAQ: RWLK) is the maker of the first FDA-approved exoskeleton for people with spinal cord injuries. In 2013, ReWalk raised $1.3 million on the Israeli crowdfunding site OurCrowd (which has a $10,000 minimum investment threshold). ReWalk went public 15 months later, and shares more than doubled in value on the first day of trading.
The fourth pillar of crowdfunding is the classic donation-based approach. Charities have historically used donations, offline and more recently online, to raise small amounts of money from large numbers of people.
In the life sciences, disease-focused charity programs have mainly supported academic research, with very little donated money going to biotech companies. In my opinion, this policy is flawed … Next Page »Comments | Reprints | Share:
In case you missed it, President Obama used his State of the Union speech Tuesday night to call for a national “precision medicine” initiative. But, as often happens in these Halloween candy bags of Presidential wish lists, the details were scant. Here’s the entirety of what he said about it:
I want the country that eliminated polio and mapped the human genome to lead a new era of medicine – one that delivers the right treatment at the right time. In some patients with cystic fibrosis, this approach has reversed a disease once thought unstoppable. Tonight, I’m launching a new Precision Medicine Initiative to bring us closer to curing diseases like cancer and diabetes – and to give all of us access to the personalized information we need to keep ourselves and our families healthier.
If you’re expecting a new National Institute of Precision Medicine to emerge and join the other 27 institutes that make up the U.S. National Institutes of Health, you might end up disappointed.
If you’re expecting a lot more orders of genetic sequencing machines, join the club. Illumina (NASDAQ: ILMN) shares rose 7 percent Tuesday as rumors of the President’s upcoming tidbit began to circulate before the stock market closed.
So what areas of work might receive NIH funding through this new push? On his blog NIH director Francis Collins points to a few NIH-funded projects that he helpfully tags with “precision medicine”:
—Better and broader identification of tumor surface proteins using minimally invasive needles.
—Smarter interpretation of genetic variants.
—Reclassification of tumors not by tissue of origin but by genetic fingerprint.
The most recent NIH budget proposal also holds interesting clues. The document presents four key themes for the NIH in 2015. Theme No. 2 is…. (drum roll, please)…. Precision medicine. “Precision medicine refers to the tailoring of treatments to the individual characteristics of each patient…NIH undertakes the challenges of precision medicine through myriad strategies,” it reads.
One of the few specific technologies it then highlights is “tissues on a chip”—which means putting microcosms of a human organ into high-throughput systems that help in drug testing. (Hitting a human cell with a drug gives limited information; hitting a bunch of heart cells behaving like heart tissue would be more useful.)
Based on the ink the budget devotes to tissues on a chip, they’re a high funding priority. There’s already a program that cuts across 15 NIH centers, and it’s led by the National Center for Advancing Translational Sciences, which, at three years old, is the NIH’s youngest.
At least one NIH-funded private company, Organovo (NYSE: ONVO), made headlines last year with 3-D printed human liver tissue samples that detected a safety problem in a drug potentially headed for human studies. Other startups in the field have emerged as well. A Boston startup called Emulate was spun out of the Wyss Institute this past summer; it’s making a lung-on-a-chip, and has designs for an integrated body-on-a-chip. Tara Biosystems, spun out of New York’s Columbia University in October, is developing a stem-cell based approach designed to simulate how a human heart would react to a drug. Some others include Seattle startup Nortis, a University of Washington spinout; and North Brunswick, NJ-based Hurel Corp., which uses an organ-on-a-chip method to replicate liver tissue.
Genetically diverse tissues could be a key to unlock precision therapies. But until we hear more details—and see the grants go out the door—we won’t know if tissue-on-a-chip research, or any kind of research, will get a boost beyond the relatively small amounts the administration can move around before a new budget is approved. (Which it did to kickstart its national Alzheimer’s plan in 2011.)
For now, though, a national “Precision Medicine Initiative” sounds a lot more presidential than a national “Tissue on a Chip Initiative.”Comments (2) | Reprints | Share:
Risk makes for great headlines. I’m guilty as charged. My first column for Xconomy questioned whether biotech venture capitalists were losing relevance, running away from risk in an inherently risky business.
Heading full steam into the new year, there will be plenty of headlines and stories from us and our peers about the brave and the few taking big risks on bold ideas. But only a handful of venture firms can be catalysts of what I like to call “bigfoot” companies: those crazy bets in the tens, even hundreds of millions of dollars on cutting-edge ideas like Moderna Therapeutics’ scheme to inject synthetic RNA into patients so that they produce their own therapeutic proteins.
So let’s emerge from the la-la-land of J.P. Morgan conference week with a reality check. Plenty of other firms are doing just fine, thanks, acknowledging risk and, like jiu-jitsu practitioners, bending and flexing with it. I had conversations with two well-known investors who are staying away from the temptation of the bigfoot and carving their own path through biotech’s ever-present thicket of risk.
The first is Avalon Ventures of San Diego. The second is Canaan Partners of Westport, Connecticut, with a big San Francisco Bay Area biotech presence.
Both have been around for decades and are investing from their tenth funds. Both are diversified, which means they like having tech and biotech under one roof sharing a pot of cash. (That’s not always the case, as the Lightstone Venture and Atlas Venture folks can attest.)
Let’s start with Avalon first.
Most biotech VCs try to whittle down risk by investing in later-stage assets that have made it at least part way through the clinical trial gauntlet. Avalon has gone in the opposite direction. Half of its biotech allotment is dedicated to finding new ideas bubbling out of research labs—most often “an academic with a paper and a patent,” said Jay Lichter, Avalon’s top biotech partner—and forming tiny companies around them. That’s usually about as risky as it gets in biotech.
But Avalon has given the international drug firm GlaxoSmithKline (NYSE: GSK) an option to buy those companies when they choose a clinical candidate—that is, when the company has nominated a drug to move forward as its main product. It’s a very early milestone, and it fetches modest returns. IPOs are definitely not part of the plan, which sounds downright radical after an unprecedented two-year run that doesn’t seem ready to abate.
But that’s all Avalon needs, because GSK is pitching in a lot of cash and resources—like the massive “screens” to help find potential drugs to hit the biological targets in the research Avalon has scouted.
GSK is collaborating with Avalon on as many as 10 of these projects. Avalon is putting in about $3 million per program, and GSK the rest.
“It takes $15 million to do a drug discovery program to clinical candidate,” said Lichter. “If I did all that in venture dollars I’d need [to sell the program for] $45 million upfront to get a 3x return. A clinical candidate is not worth $45 million ever, I don’t think.”
Is it working? Beyond Lichter’s assurances, there is no hard evidence. GSK has not exercised any options to acquire yet, but it’s early. Only three of the collaborative projects have been unveiled: Silarus Therapeutics, Thyritope Biosciences, and Sitari Pharmaceuticals.
Another good sign would be a new fund, Avalon’s eleventh, which Lichter said is under way. (The tenth closed in 2012 with $200 million in commitments, and it’s being invested roughly half in tech, half in biotech.) If the new one closes this year, as Lichter expects, it should mean that LPs aren’t revolting against the biotech strategy.
Part of the pitch for the new fund is that Avalon wants to do the risk-sharing arrangement again, either with GSK or another pharma. “Even if GSK doesn’t want to do it again I would imagine we’d find someone else just as happy to step into those shoes and get 10 new shots on goal,” he said.
Avalon is doing more conventional biotech investments, too—if a company exploring applications made possible by expanding the basic information used in DNA code can be considered conventional.
But the relative modesty of the “build to buy” philosophy of Avalon’s GSK collaboration generally applies to the rest of its biotech plan, too.
When asked about the early stage investors who often throw $30 million or more into a Series A round, Lichter replied, “We’re rarely competing for deals with them, and if they want something I’m looking at, I step away. They can have it. I don’t need it. There are plenty of good deals out there.”
While Lichter pays heed to the science journals for the latest … Next Page »Comments | Reprints | Share:
The word “story” gets ill treatment at events like the J.P. Morgan Healthcare Conference. It often means an elevator pitch from a harried CEO to a distracted investor, or a few observations a journalist strings together with a headline, or Twitter snark trying to pass for insight.
But we heard a real story on Sunday night from Martha Rhodes, a former advertising executive who has written a memoir of her treatment-resistant depression and the treatment that saved her life.
Speaking at a dinner arranged by a Boston venture firm, Rhodes was a reminder that the short-attention span and shorthand skepticism that abounds at events like J.P. Morgan is, above all, a distraction.
With the help of a device that delivers transcranial magnetic stimulation, Rhodes is drug-free and, more important, feeling great. She hid her depression well during her career, she said, but she eventually attempted suicide to escape. “Imagine the Monday morning feeling of not wanting to wake up and go to work that everyone sometimes has,” she said. “Now imagine it happening every morning, and a thousand times worse.”
The dinner was an annual event meant to squeeze the press into a small space next to the firm’s portfolio companies, including the maker of Rhodes’s treatment. But it was no polished PR campaign (even though, yes, she is a former ad exec). Rhodes shook off obvious nerves to tell her story in front of several dozen strangers, and was warm and humble, if slightly frazzled, afterwards. It will be the one story that sticks with us for years to come.
There was, of course, plenty of news to report and conversations to relate. We’ve tried to gather some of them in this roundup and for those who haven’t lived it, we hope you get a flavor of what the four-day frenzy is like.
—Bluebird Bio was almost Spark Therapeutics. When Nick Leschly was at Third Rock Ventures and began looking into gene therapy several years ago, Genetix Pharmaceuticals—the struggling company that Third Rock would later help turn into Bluebird Bio (NASDAQ: BLUE)—wasn’t his first target. Instead, Leschly did a “year-long dance” with a program being developed at the Children’s Hospital of Philadelphia for a rare, inherited form of blindness.
“We know that program inside out,” Leschly said. “But we said we just couldn’t build a company around that at that time. Too much infrastructure for a tiny, tiny indication.”
Yet that research educated Leschly, and Genetix, which he felt had “more legs, and broader legs,” because it was using lentivirus (a neutered HIV virus) to deliver its treatment, which less commonly used than the adeno-associated viral vector (AAV) the CHOP program was using.
“We thought if we played our cards right and learned how to manufacture it, that beta-thalassemia, sickle cell disease, and a whole bunch of other indications could be really interesting,” he says. “It had much less of an ecosystem around it than AAV at the time.”
That led to Bluebird. But the CHOP program has shown some legs, as well. It was the foundation of Spark Therapeutics, which sold rights to its hemophilia B program to Pfizer last month then filed for an IPO.
—Why do so many diagnostics companies fail? They’re asking the wrong question. With the explosion of new technologies that let companies “measure things you were never able to measure before,” said Veracyte (NASDAQ: VCYT) CEO Bonnie Anderson, “the opportunities are there for diagnostics companies to emerge with new tests that change various standards of practice.”
Still, it’s hard to break in. Reimbursement is an enormous challenge, as is convincing doctors your test is good enough to change what they do. What’s the key? Three things in particular, said Anderson:
1) A clear strategy that identifies the “right” clinical question to answer.
2) Well-designed clinical studies leading to supportive evidence in peer-reviewed journals.
3) Demonstrating that a test improves care and saves money. “In today’s healthcare, if you’re not doing both, you’re going to have a tough time,” Anderson said.
Veracyte has developed a molecular test to tell doctors whether a thyroid lump is benign or cancerous. If it’s benign, patients can avoid unnecessary treatment, which in turn saves money. Some 20 to 30 percent of suspicious thyroid lumps that get biopsied are inconclusive, and many patients undergo expensive surgeries to remove their thyroid even though most of them are later shown not to have cancer.
—Is the next Cubist even possible? Cubist Pharmaceuticals (NASDAQ: CBST) of Lexington, MA, is an anomaly: a startup that became an antibiotics leader capable of buying others—until, of course, it got bought by Merck. Can other antibiotics makers get that far, or are those fortunate enough to have a first product approach FDA approval destined to be acquired before long? The next case study is Watertown, MA-based Tetraphase Pharmaceuticals (NASDAQ: TTPH). It’s headed towards its first FDA approval, and was said to have begun exploring a sale in November.
“If you’ve got a great product and it’s well differentiated, I think it is becoming harder to get to the finish line on your own,” said Tetraphase CEO Guy MacDonald. “If someone comes along with an offer, we’d consider it, but if it doesn’t make sense, we won’t do it.”
He noted that a few years ago, five or six antibiotic companies had candidates in either Phase 2 or Phase 3 testing, and all said they were going to commercialize their products on their own—only to get bought.
Will Tetraphase? Like others in the past, it could soon be launching its first antibiotic in the U.S., and aims to start hiring a sales force in 2015. We’ll see if it’s still independent by then.
—The Alkermes of the future: a Celgene-style dealmaker? It’s well known that Alkermes (NASDAQ: ALKS) has transformed itself from a drug delivery company to a drug maker with several neurology candidates in its pipeline, and in the process cut its corporate tax rate significantly by buying Ireland-based Elan Drug Technologies and moving its corporate headquarters to Ireland.
Investors have rewarded the shift, boosting shares from about $22 apiece in April 2013 to $68.24 as of this writing. CEO Richard Pops has always talked about Alkermes one day being a peer of Celgene (NASDAQ: CELG). With his company now worth about $10 billion, Pops is taking cues from Celgene’s creative dealmaking to plan its next stage of growth.
Celgene adapts deal structures to fit specific companies, while typically leaving those partners the breathing room to be nimble and independent. That was on full display at … Next Page »Comments | Reprints | Share:
The buzz from day one of the J.P. Morgan Healthcare Conference in San Francisco earlier this week was the announcement on Sunday night by Roche that it was acquiring a majority interest in Foundation Medicine (NASDAQ: FMI) for a bit more than $1 billion in cash, which translates into $50 a share. Those were just the latest eye-popping numbers from Foundation, which went public in September 2013, amid warnings of a biotech bubble. From its initial offering price of $18, Foundation proceeded to enjoy a first-day jump all the way up to $35 a share, straining credulity for those investors focused on the fact that the company had not received meaningful reimbursement for its flagship cancer diagnostic product, FoundationOne.
It’s sixteen months later and Foundation still has not received the positive coverage decisions from Medicare or major private insurers that it would need in order to even dream of making money on its sequence-based diagnostic test. The stock had ridden down to $23 a share before the acquisition and there was plenty of short interest even at that level (pity those investors who did not cover those shorts on Friday!).
But Roche still went ahead and bought the majority of an unprofitable company for $1 billion in a transaction reminiscent of its purchase of a controlling stake in Genentech in 1990. Aside from the deal structures, which in both cases leave the U.S. management team intact—if now reporting to Roche headquarters in Basel, Switzerland—there would seem to be virtually no similarity. Roche has moved far beyond its early-90s status as a small molecule-heavy European pharma eager to transition into biologics. At the time of the initial Roche transaction, Genentech was already a powerful product engine, having developed early protein replacement therapeutics human insulin and human growth hormone with lots more in the pipeline and vibrant science to match. By contrast, Foundation has done little more than make losses on its diagnostics business.
But there is one big parallel between that deal and this one: In both cases, Roche believes that it has seen the future of the pharmaceutical industry. And it can only grasp that future by placing a large and risky bet on a U.S. innovator company. Roche’s thorough transformation into a company invested in targeted therapies driven by disease biology supports my thesis that it was the only pharmaceutical company in the world that had a rationale for acquiring a big stake in Foundation and that it is the one best positioned to make the deal a success.
In my view, the key reasons boil down to these:
• Roche was early and fervent in its embrace of diagnostics as drivers of drug development and sales. I know only one top executive in the pharmaceutical industry who cut his teeth in molecular diagnostics and he did so at Roche—Daniel O’Day, who was the CEO of Roche Molecular Diagnostics from 2006 to 2010 and is currently the chief operating officer of Roche Pharma. Once the Foundation transaction is completed, O’Day and two others chosen by Roche will join Foundation’s board of directors. Aside from the personal, Foundation also fell on fertile ground at Roche on the institutional level. Roche had already changed its drug-discovery focus to be more diagnostics-driven than most other pharmaceutical companies on virtually every level. As Roche CEO Severin Schwan declared in 2012: “More than 60% of our pharmaceutical pipeline projects are coupled with the development of companion diagnostics in order to make treatments more effective.” That number has almost certainly gone up.
• Roche was the pharma that had most thoroughly integrated clinical genomic sequencing into its trial protocols, long before it had figured out how best to use the data. In my work with biotech companies, I had been hearing for years how Roche had embraced sequencing data as a key success factor for the pharma industry of the future. As soon as the cost of sequencing became halfway affordable (maybe $5,000 to $10,000 per full sequence), Roche began to require genomic insights from every patient in every clinical trial. If there was any doubt about how highly Roche regarded sequencing, its $51-a-share Illumina (NASDAQ: ILMN) bid in 2012 dispelled it. (Illumina, whose CEO Jay Flatley said at the time that the bid seriously undervalued his company, now trades at $181 a share).
An executive speaking under condition of anonymity who knows Roche Ventures confirmed that Roche places high importance on genomic data—both that it has itself collected, as well as the data being collected by Foundation. As an aside, Roche Ventures had invested in Foundation two rounds before the IPO in 2012 and had no strings attached in the form of a promised acquisition or partnering deal. That investment is another indicator of the value Roche management placed on keeping up with the world of clinical sequencing. That executive told me on Monday that Roche was counting on Foundation’s data scientists to be able to make the most effective use of their own banks of both sequencing and outcomes data and that the prospect of joining forces was irresistible.
• Roche realized that it would face competition if another pharma company scooped up Foundation. Roche believes that in genomic profiling, it has identified a common theme for creating value in cancer drugs of whatever stripe—targeted therapies like kinase inhibitors; biologics like monoclonal antibodies; and even immuno-oncology approaches like checkpoint inhibitors. Having made this observation, it did not want anyone else to catch up. Combining Roche’s clinical sequencing data and its drug pipeline with Foundation’s gene-level and patient-level insights clearly would realize the most powerful synergy. But in the hands of another pharma, the Foundation team and data sets could have posed competition. Ergo, Roche decided to buy into Foundation now.
• Roche is counting on a shift from biochemical targets to genomic profile targets, especially in drugs for solid tumors. Foundation’s “poster child” cancer cases are those in which genetic profiling suggested—against all experience of oncologists and with no evidence from n-of-1,000 clinical trials—that cancer drug X, developed for, say, ovarian cancer, would work best in cancer indication Y (e.g. prostate cancer). Because the patient is desperate, the physician prescribes the drug and … Next Page »Comments | Reprints | Share:
San Diego-based TVC Capital, a small private equity firm that specializes in growth-stage investments in software companies, has closed its third investment fund with $115 million in capital commitments.
All of the firm’s existing institutional investors participated in the fund, TVC Capital III, along with three new investors, according to Jeb Spencer, a co-founder and managing partner. The new investors include Horsley Bridge Partners, a global fund-of-funds institutional investor based in San Francisco.
In a statement, Horsley Bridge managing director Lance Cottrill says, “We find TVC’s uniquely differentiated strategy, disciplined approach and proven ability to add value to their portfolio companies to be very compelling.”
Spencer says the fund was oversubscribed, and closed 90 days after TVC began fund-raising. “We could easily have raised a $150 million fund,” Spencer said yesterday. “But we have to stick to our philosophy and keep our fund size small. We want to be able to continue to invest in software companies with $3 [million] to $15 million in revenue.”
The firm will still have to expand its staff, and is looking to hire professionals experienced in software and growth equity investment, Spencer said.
The nine-year-old firm raised $75 million for its second growth equity fund in 2012, and currently has about $225 million under management.
TVC has so far realized three successful exits from its first fund: the sale of El Segundo, CA-based Accordent Technologies to Polycom; the sale of San Diego-based Del Mar DataTrac to Ellie Mae; and the sale of Seattle’s Mercent to CommerceHub, a Liberty Media subsidiary.
TVC’s second fund saw its first exit in October, when San Diego’s Anametrix was acquired by San Jose, CA-based Ensighten.
TVC says its investment philosophy emphasizing operational value creation and working “in the trenches” with software management teams to accelerate growth, maximize value, and position companies for a profitable exit.Comments (1) | Reprints | Share:
Whew. J.P. Morgan is almost over. (The healthcare conference, that is, not the investment bank.)
Opening the week’s proceedings at the Biotech Showcase, a satellite conference that features small, private, often European companies that would get trampled at the main event, Sangamo Biosciences CEO Ed Lanphier greeted the early crowd: “Welcome to Hell Week.”
We’ll soon have a notebook full of thoughts, observations, and other news from the conference itself—and all the discussions, interviews, chance meetings, and parties that revolve around it—but let’s get the rest of the West Coast biotech news out of the way. To the roundup!
—Tobira Therapeutics of San Francisco and Regado Biosciences of Basking Ridge, NJ, said they would merge, a move that gives the privately held Tobira access to the public markets. Just before the holidays the firm had revived its move toward an IPO. Now that’s not necessary thanks to the reverse merger with Regado, a publicly traded company that has been essentially a shell since its Phase 3 drug REG1 failed last summer. Tobira is testing its lead drug in liver disease and HIV. With the merger, Tobira also pulled in a $22 million funding round from existing backers.
—Terms of a deal announced by Novartis (NYSE: NVS) and Qualcomm (NASDAQ: QCOM) make it clear that clinical trials are emerging as a new global market for wearable health monitors and related technologies. Novartis is using Qualcomm Life’s wireless 2net platform to aggregate patient data in clinical trials. In a related move, Qualcomm and Novartis agreed to form a $100 million fund to invest in innovative digital health startups.
—Second Genome of South San Francisco, CA, said Monday it had been quietly testing for months its first product to reach human trials, a drug to treat Crohn’s disease by blocking the inflammatory effects of a disrupted microbiome. Those Phase 1 tests will continue into 2015. (See another microbiome item below.)Comments | Reprints | Share:
It’s easy to catch the technology bug. After all, tech companies are pretty much everywhere. I became hooked when I worked as an IT consultant at Accenture after college, and plan to work at a technology company after I finish my MBA. So when I had the opportunity to participate in a Technology Trek at MIT, I jumped at the chance of visiting some of the leading market players recognized globally for their entrepreneurial and technological innovation.
I was very curious about what it’s like to work at a larger technology company, especially big ones with more resources like Facebook and Google. What is their culture really like? What kind of impact can a recent MBA graduate make? During our Technology Trek last week with 27 other MIT Sloan MBA students, I was able to get some answers.
First up was Google’s Mountain View campus. I had never seen it before, and was taken by the size of campus, the people I met, and the general atmosphere. In addition to the famous Google bikes that employees use to get around, we also saw the Wellness Center complete with nap rooms, yoga studios, and a juice bar. During our tour, we learned that Google is opening new offices just a few miles away. It’s pretty big now, but soon it will double in size!
As part of the tour, we met with a panel of MIT Sloan MBA alumni who work on different teams across Google. They talked about the opportunities for graduates to make a difference at the company. One speaker explained how he helped build the infrastructure for Google’s massive servers. Another talked about working on the Motorola acquisition a few years ago. They also noted that Google is focused on helping employees succeed with career growth and networking opportunities. That was all very encouraging to hear.
We then headed to Tableau, a data visualization software company located in Menlo Park. It’s smaller comparative to Google, but is a fast-growing publicly traded company. An executive gave us an overview of the company, and an MIT Sloan alum provided a product demonstration. One of the cofounders, Pat Hanrahan, also stopped by to talk about Tableau’s origins and vision. It turns out that Pat is responsible for some of the technology used in movies and has won Academy Awards for his work.
From there we headed to Facebook’s newer campus in Menlo Park. It was the most stunning campus I’ve ever seen. It feels more like Disneyland with themed restaurants, pastel buildings, perfect landscaping, and sky bridges. Incredibly, it’s expanding with second campus of similar size.
After our tour, we met a panel of MIT Sloan alumni. There’s the notion out there that having an MBA isn’t necessarily enough to succeed in the tech industry. So we asked our panelists for the lowdown. They said that education is important, but it’s true that the company won’t hold your hand. You need to be scrappy and a hard worker. They also talked about its collegial environment and how there are many other MIT Sloan alumni there to support you. One thing I particularly liked was their “ship love” motto – encouraging employees help each other out. The bottom line was that it’s a fast-paced environment with cool things to work on. It’s high pressure, but employees have opportunities to go above and beyond and really shine.
We also went to Netflix’s campus with its stucco and red-tile buildings. Like most other companies we visited, it is expanding. The campus is designed to be open and inviting with a collegial vibe. In support of that, our conference room was designed like a coliseum with concentric circles of seats for roundtable discussions.
Our panelists talked about how a big focus is on developing exclusive content. I asked if they had any plans to go into books or music like Amazon and Spotify, but the clear answer was no. The company is also very data driven, so we talked about how data received from subscribers is used to make the Netflix experience more robust.
On our last day, we visited a few smaller tech companies in the city, including Symphony, which had a startup vibe with its warehouse design, open desk seating, ping pong table, fridge full of snacks, and a few dogs running around. Instead of a formal presentation, it was more of a meet and greet. Employees talked about how the company pivoted a few years ago to focus on helping the operational side of new businesses. They discussed how they are expanding and a big challenge is hiring more people. That was good news for a group of first-year MBA students.
Overall, it was a very enlightening trek. We learned a lot about the different types of companies in the area, and I’m more excited than ever to return to Silicon Valley after graduation and enter this sector.
[Editor’s note: The Technology Club at MIT’s Sloan School of Management organizes an annual student trip to Silicon Valley to tour top technology companies. Xconomy traditionally invites one Sloan student each year to blog about the experience.]Comments | Reprints | Share:
On December 24 2009, Xconomy published a column in which I reflected on the preceding decade and predicted for the coming one. I still quote that column in talks, because it’s the one time I can remember when I was actually right: I said that this would be the decade in which computer scientists put the “smarts” into everything.
This time I’m not going to risk predictions—my track record is one-out-of-many. Here are some ideas on three safer topics:
1. Diversity in the technology community
I always start discussions on diversity with “Why does it matter?” For reasons of workforce, sure: There’s a lot of work to be done, and if we had more workers, we’d be better off. For reasons of social equity, sure: Tech jobs are great jobs, and members of under-represented groups should have the benefit of participating. But the No. 1 reason—the reason that should appeal to even the most hard-hearted capitalist—focuses on quality. We in tech are engaged in design, which is inherently creative. Each of us brings our own perspective—our own baggage—to the creative process. If there are groups that are excluded, then there are perspectives that are not considered, approaches that are not considered, problems and solutions that are not considered. A more diverse workforce yields a superior outcome. It’s as simple as that.
I applaud Google for being the first major tech company to publish its workforce statistics, an act that compelled many other tech companies to do the same. The numbers weren’t pretty, but their publication represents a commitment to improvement.
We are, indeed, a “mirror-tocracy.” Academia is as bad as industry. All of us must commit to do something about it—beginning at home.
2. Directions for education
There are three things I’d focus on.
The first pertains to my home, Washington State. Our education system, top-to-bottom, trails the nation. Forget China and India! Why is it that among the 50 states we rank 37th in preschool enrollment, 31st in the proportion of 9th graders who graduate from high school on time, 46th in the proportion of high school graduates who enroll directly in a 2-year or 4-year college, 37th in bachelors degree participation rate, 42nd in per-pupil expenditures for K-12 education (adjusted for cost of living), and 49th in per-student funding for higher education (the sum of tuition and state support)? We are the ass-end of the donkey in educational performance, top-to-bottom. Why do the citizens of Washington tolerate this?
The second concerns Computer Science in K-12. God bless Hadi Partovi and Code.org for changing the landscape nationally. Computer Science in K-12 is important not because these kids will grow up to work in the software industry, but rather because “computational thinking” is an essential 21st century capability for everyone, and programming is the hands-on, inquiry-based way that we teach computational thinking. However, in Washington State, expanding exposure to computer science will not address the overall lame-ass performance of our education system—we cannot allow a focus on this “shiny new object” to obscure the fact that our education system, top-to-bottom, lags the nation.
The third concerns higher ed. You hear a lot of yap about STEM—Science, Technology, Engineering, and Mathematics. Here’s the truth: Nationally, and in our state, the *only* workforce shortage in STEM is in Computer Science, and to a much lesser extent in other fields of Engineering. (In our state, the gap between degrees granted and jobs available is 2.5 times as large in Computer Science as in all other Engineering fields (Electrical, Mechanical, Industrial, Chemical, Aeronautical, Materials, Civil, etc.) combined—and other fields don’t even register.) In making investments, let’s be clear-headed about where the gaps exist!
3. Advice for students interested in computer science
Just Do It! The future is unbelievably bright—as Steve Ballmer recently said, “So bright you need shades!”
[Editor's note: To tap the wisdom of our distinguished group of Xconomists, we asked a few of them to answer questions heading into 2015 on topics including diversity in technology, education, and advice for those entering their field. You can see other questions and answers here.]Comments | Reprints | Share: